Most are aware of the noteworthy U.S. Supreme Court decision in AT&T Mobility v. Concepcion, 131 S.Ct. 1740, issued on April 27, 2011. I addressed the implications of Concepcion in a previous blog. Concepcion has generated a lot of discussion and has been feared by some to be the “death knell” of the consumer class action. But can the reach of Concepcion actually be much farther? Will Concepcion be labeled the “death knell” of preliminary state administrative hearings as well? The U.S. Supreme Court’s recent summary disposition of a Petition for Writ of Certiorari in the California state case Sonic-Calabasas A, Inc. v. Moreno raises these questions.
Just three months prior to the U.S. Supreme Court’s ruling in Concepcion, the California State Supreme Court held that an arbitration clause in an employment agreement which would require the waiver of a state administrative wage dispute hearing was unconscionable and the California court’s holding was not preempted by the Federal Arbitration Act (“FAA”). Sonic-Calabasas A, Inc. v. Moreno, 51 Cal. 4th 659, 684-687, 695 (Cal. 2011). The California Supreme Court, however, did hold that the arbitration clause was enforceable to the extent that any “appeal” of the administrative hearing could be required to be heard by an arbitrator instead of the state court. Id. at 676. The California court distinguished then-existing U.S. Supreme Court precedent that Sonic-Calabasas A, Inc. (“Sonic”) argued was controlling and reasoned:
A public policy based solely on the supposed superiority of an administrative forum over arbitration could no more survive FAA preemption than could a policy based on the supposed superiority of a judicial forum. But neither do we understand the FAA to preempt a state's authority to impose various preliminary proceedings that delay both the adjudication and the arbitration of a cause of action in order to pursue important state interests….The Supreme Court has never suggested that the FAA requires that these preliminary proceedings be bypassed in order to go directly to arbitration.
Id. at 693 (citations omitted) (emphasis added).
On October 31, 2011, in what is known as a GVR Order, the U.S. Supreme Court granted Sonic’s Petition for Writ of Certiorari, vacated the California Supreme Court’s decision, and remanded the case for further consideration in light of AT&T Mobility v. Concepcion. GVR orders – grant, vacate, and remand orders – have been issued by the U.S. Supreme Court since the 1920s as a mechanism to allow lower courts to have an opportunity to review their own decisions in light of an intervening change in law or factual circumstances that may be outcome determinative. The use of the GVR order has expanded over time, and there seems to be confusion in the legal community regarding the true meaning of GVR orders. The GVR order is considered an indication that the U.S. Supreme Court believes that there has been a development in the law that warrants reconsideration of the lower court’s ruling, but the U.S. Supreme Court has not ruled in a manner that would predict how it would rule if a GVR’d case finds itself in front of the high court again. An excellent discussion regarding the history and meaning of GVR orders can be found here.
So, is the U.S. Supreme Court now suggesting that the FAA may in fact require that such preliminary administrative proceedings be bypassed pursuant to a binding arbitration agreement? If so, the implications of Concepcion could be far broader than most probably have considered.
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